How do businesses end up filing for bankruptcy? - Part I

On behalf of Law Office of Judith A. Descalso posted in Chapter 11 on Wednesday, October 5, 2016.

In Part I of this two-part series, we began to take a look at some of the reasons why businesses end up filing for bankruptcy. Part I examined two of the most crucial reasons: the failure to adapt and the mistake of expanding too quickly. Here, in Part II of the series, we will look at two more concepts that are commonly tied to a business bankruptcy filing: faulty business practices and problems with ownership.

When it comes to business practices, companies need to know how to maximize exposure for their products, but to do so in a way that draws consumers in. In a word, it comes down to advertising. Companies need to market their products in such a way that consumers are hearing the story of why they need to own or use a certain product. If a business model isn't crafted with this type of goal in mind, opportunities could be missed and profits could be lost. Simply put, if a business isn't selling its product, a Chapter 11 bankruptcy could loom.

Ownership issues can be a major complication for the continued success of a company. For instance, think of a family-owned business: it may be a company that has been around for decades, with family members waiting in the wings to take on key roles and help the company maintain profitability. That can be good, but then think of a company that is owned by an investment conglomerate. The company may simply be viewed as an asset - squeeze as much profit out of it as possible, and then dispose of it. The type of ownership structure in any given company can make a big difference in the company's long-term success.

Business bankruptcies can occur for a variety of reasons, as this two-part series has made clear. A business in Escondido that is facing the possibility of bankruptcy will likely need to get more information about the reasons for financial difficulties, and the possible solutions.

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